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00:00 It's all about earnings. Dixon Technologies reported numbers. It's actually a good quarter
00:04 for the company. The outlook looks promising. The stock has been a street favorite in the
00:10 recent past, trading with a gain of nearly 3 percent as we see. So, it's not – it's
00:14 actually doing quite well on a day when the markets are down. Saurabh Gupta, CFO of Dixon
00:19 Technologies now joins in. Saurabh, hi. It's Amina joining in. Saurabh, it's been a good
00:24 quarter. The focus very largely from the company what we understand is on revenue and not profitability.
00:29 So, much and mobile and EMS has been the biggest sort of growth number that we are seeing year
00:36 on year. It's up about 120 percent. Is that the right understanding? The focus of Dixon
00:42 will be on a low margin business like mobiles, but that is where the key growth driver for
00:47 FI25 could be coming from. Yeah, so very good morning. So, clearly mobile
00:53 will be the largest trigger for our growth, mainly because the opportunity pool in mobiles
00:57 as compared to the other verticals is the largest. And no doubt mobile is slightly lower
01:03 margin business, both on the gross margins and both on the beta margins. But the opportunity
01:09 pool is immense and we want to capture a large part of that opportunity. But it's not that
01:15 the company is not focusing on profitability. In every vertical, we are planning to do more
01:20 backward integration. We're planning to migrate more and more to our own design solutions.
01:24 And also the benefit of operating leverage will also keep kicking in in most of the verticals,
01:29 including mobiles. In mobiles also we have a plan for doing backward integration for
01:33 display for smartphones. So, clearly the profitability is equally a focus, ROC is equally a focus
01:41 and management of current assets is equally a strong focus of the company.
01:45 What are the number of units you're targeting for FI25 in the mobile business and also margins
01:50 this quarter came in at 3.9%. If design backward integration operational leverage is expected
01:57 to play out for the company, can we expect margins to go back to levels of 5 or that
02:02 looks a little far fetched to this stage? See, 5% definitely looks difficult. 5% we
02:08 haven't achieved in the last couple of years. And clearly mobile is, as I mentioned, lower
02:13 margin business, but definitely we can keep expanding the margins by 10-20 bps for next
02:19 couple of years, mainly in the call of the backward integration and operating leverage.
02:24 And we see that expansion in mobile business, the margins also expanding in a mobile business
02:29 because from 7 million volumes that we have done in last financial year, we are now looking
02:35 at a volume of almost 20-30 million along with some kind of a backward integration.
02:39 But the backward integration results will only start reflecting in next financial year.
02:43 Saurav, if you can just give us an idea about the benefits that are coming through PLI,
02:48 the expectations for the upcoming financial year and what sort of an impact can we expect
02:54 when it comes to the bottom line going ahead? Yes, so Dixon, we are a beneficiary of five
03:00 PLIs, the largest being on the mobile side. We are working with the top six global brands
03:06 and we are also adding one more, hopefully we will add one more brand in the next three
03:11 to four months. So we have a large play in mobile phones. The second PLI is for telecom
03:16 and networking products. Again, we have a large order book, both from the two largest
03:21 telecom companies in India. Third, on the IT hardware, the APEX is being done and this
03:30 will be the first year for our revenues. And fourth and fifth PLI is on the components
03:35 both for lighting as well as for AC inverter control board. So clearly we are the largest
03:40 beneficiary of the PLIs and PLI definitely gives us a lot of advantage. And yeah, and
03:47 basically it's even outside the businesses which are not under the PLI, clearly there
03:55 is a decent growth lined up in those verticals as well. The CAPEX year marked for this year
04:00 and in what areas are these funds being allocated? Yeah, so last year we did a CAPEX of 570 odd
04:09 crores. My sense is the CAPEX for this year broadly should be slightly lower than that.
04:15 And also we have done an acquisition which we are awaiting the approval of the competition
04:20 commission of India. And hopefully we feel confident that by next month we should be
04:25 able to consummate the transaction and start consolidating the financials from July Q2
04:30 onwards. So there the CAPEX outgo can be another 300 odd crores. Yeah, so total CAPEX outgo
04:36 can be somewhere around 650 to 700 odd crores for this year, including the acquisition.
04:41 So I'm assuming you're referring to ISMARTU and COMPIL, which is the acquisitions that
04:47 you've done last month. I know the street was quite excited about that. And I think
04:51 the management, I think Atul Lal did say that you would look at increasing your wallet trend,
04:56 the export market through these partnerships. Is that a fair understanding of what this
05:00 acquisition could do for you? Yeah, so this acquisition is of a company called ISMARTU,
05:06 which is a manufacturing entity for brands like ITEL, Infinix and Tecno, which are the
05:11 brands of Transition Group. Transition Group happens to be the top five companies in smartphones
05:16 and top two companies in feature phones globally. They have a decent market share in India as
05:21 well in both these categories. So yes, under this partnership, we'll start, we not only
05:26 manufacture for those brands, we look at manufacturing for other brands as well. And over a period
05:31 of time, this relationship can be large for us, where we get into the component ecosystem
05:36 along with them. We look at doing some exports from India. Yeah, so this can be over a period
05:41 of time, a large, large partnership for us. What about BBK Group, which is China's largest
05:48 phone maker? We believe there's been some development on that front as well. Any updates
05:53 on that? And what could that do for your top line? When will that start turning revenue
05:56 creative? And also in that same breath, how do you plan to fund all these very aggressive
06:03 backward integration plans that you've lined up? Is it all going to be through internal
06:06 accruals? So to answer your second question first, I think so. Clearly with the earnings
06:11 visibility we have right now, and even in last financial year, if you look at the cash
06:16 generated from operating activities, that was, the CAPEX was entirely funded out of
06:21 them. In fact, our debt levels have actually come down. This year also, we feel confident
06:26 that the earnings will expand because of the order book that we have. And clearly the CAPEX
06:31 can be easily funded from the internal accruals. On OPPO specifically, yes, we've already started
06:38 manufacturing for them this month. Potentially we are doing a volume of almost 4, 4.5 lakhs.
06:44 And we expect to, yeah, ahead of the festive season, in fact, those volumes can potentially
06:48 go up. And yeah, so it's a large account for us. And the stock is reflecting just that.
06:55 At the day's hype on Dixon Tech, so great chatting with you. It's good to know that
06:59 the outlook for Dixon looks as promising as the stock price at this stage. Good luck and
07:05 congratulations once again.
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